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U.S. Retaliation On Russia Likely Soon; Cyclical Tilt To Europe

By Stephen InnesMarket OverviewApr 08, 2021 04:33AM ET
www.investing.com/analysis/us-retaliation-on-russia-likely-soon-cyclical-tilt-to-europe-200571895
U.S. Retaliation On Russia Likely Soon; Cyclical Tilt To Europe
By Stephen Innes   |  Apr 08, 2021 04:33AM ET
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Asia Recap

While US stocks remain in 'kids in a candy store mode," Japanese shares slipped amid concerns Tokyo is planning stricter steps to curb rising virus infections,

In the commodity markets, oil was idling just under Brent $63 in Asia before London had its say about a world struggling to escape the lockdown abyss, and Brent quickly printed 62.50s. Let's see how the buy on dip strategy plays today as there is a pretty decent bid to the global "risk-on" tape.

Some oil buyers are anticipating good news on the EU recovery front. My feeling is this will soon be completely digestible and a highly correlated trade via the EUR/USD (weaker USD). After all, the euro should move higher on more positive reopening news, particularly around the improved vaccination rollout front, and oil should follow, while gold could be catching a bid on escalating US-Russia tensions (see below).

The dollar saw a bit of a bounce after the FOMC minutes on Wednesday, but the overall downside momentum stayed intact and has started to slip back lower again in early European trade.

Cyclical Tilt To European Equities

The European equities tape should have a cyclical tilt early, led by some of this year's outperformers like banks and autos (which remain very resilient). And the path of least resistance continues to remain higher. And if there is a case that you buy what you don't own, then Europe is certainly under-owned. With S&P getting towards its upper reaches, so Europe is the catch-up play.

The pro-reflation bias continued in Asia led by materials and banks. There has been a momentum reversal in China where markets are now in positive territory, but the PBoC policy debate could keep China risk on a yo-yo string for a while

Over the street's feeling is that Equities seem to be waiting for the Q1 earnings season to kick-off, with the Street looking for nearly 25% growth in S&P earnings. Supply constraints, input cost pressures, pricing power and wallet share shifts are likely to be big conference-call themes.

US Retaliation On Russia Likely Soon

Biden administration officials have completed an intelligence review of alleged Russian misdeeds, such as, election interference and the SolarWinds hack, setting the US's stage to announce retaliatory actions soon, Bloomberg reports. Possible moves could involve sanctions and the expulsion of Russian intelligence officers in the US under diplomatic cover.

The White House is in talks to appoint a special envoy to lead negotiations on halting the construction of the Russia-to-Germany gas pipeline—Nord Stream 2, Politico reports. The potential appointment of an envoy indicates a new strategic focus by the administration.

US lawmakers from both parties have argued that regardless of any German attempts to sweeten the deal for Washington, the pipeline would place Russian infrastructure inside NATO territory and thereby threaten its member states.

U.S. Retaliation On Russia Likely Soon; Cyclical Tilt To Europe
 

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U.S. Retaliation On Russia Likely Soon; Cyclical Tilt To Europe

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Comments (1)
jonathan seagull
jonathan seagull Apr 08, 2021 6:06AM ET
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Indo mot get it that Russian pipelines into Europe is a security threat. In 18C, Russian fox fur was a essential item to every affording woman. For the entire century. Were there any threat caused by that?
 
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